Incoterms - Trade terms published by the International Chamber of Commerce (ICC) that are commonly used in both international and domestic trade contracts. Incoterms, short for "International Commercial Terms," are used to make international trade easier by helping traders in different countries understand one another.

You will note our short guide to Incoterms in the side bar of our services pages, here is more of what you need to know & why it’s so important to get Incoterms right from the start!

Are you looking at buying goods from overseas to re-sell in Australia? Has the supplier or factory given you a quote for the goods and told you that the terms are FOB / EXW / CIF etc. Are you thinking … what do these 3 letters mean?

What are Incoterms®?

The term, Incoterms® is an abbreviation for International Commercial Terms.

Incoterms® are a set of rules which outline the responsibilities of sellers and buyers for the delivery of goods under a sales contract. They are published by the International Chamber of Commerce (ICC) and are widely used in International commercial transactions.

The first Incoterms® were issued in 1936. The most current version of Incoterms® is Incoterms® 2010, which were introduced in September 2010 and became effective January 1, 2011.

Incoterms are also known as Delivery terms

What are Incoterms® used for?

Incoterms® provide a common set of rules to clarify the responsibilities of sellers and buyers for the delivery of goods under sales contracts (An example of a sales contract – is the invoice your supplier just gave you).

Incoterms distributes the transportation costs and responsibilities relating to the delivery of goods between buyers (importers) and sellers (exporters) and mirrors the modern-day transportation practices. Establishing the incoterm significantly decreases any misunderstandings among the buyer and seller and thereby minimizing trade disputes and litigation.

What are the Incoterms® 2010?

There are now two main categories of Incoterms® 2010 which are grouped by the modes of transport.

These can be used in international as well as in domestic contracts, the new groups aim to streamline the drafting of contracts and assist with avoiding misunderstandings by clearly stipulating the responsibilities of buyers and sellers.

Group 1 – Incoterms® that apply to any mode of transport are:

  • EXW – Ex Works
  • FCA – Free Carrier
  • CPT – Carriage Paid To
  • CIP – Carriage and Insurance Paid To
  • DAT – Delivered at Terminal
  • DAP – Delivered at Place
  • DDP – Delivered Duty Paid

Group 2. Incoterms® that apply to sea and inland waterway transport only:

  • FAS – Free Alongside Ship
  • FOB – Free on Board
  • CFR – Cost and Freight
  • CIF Cost, Insurance, and Freight

The movement of cargo across international boundaries, by necessity, requires the involvement of a number of service providers and authorities. These parties include Customs and other Permit Issuing Agencies, Transport Operators (Forwarders, Carriers, and Brokers), Insurers and Banks.

The delivery terms assist with telling either party at least;

  • who is responsible for taking certain action and who is to pay for it
  • where the risk in transit transfers from seller to buyer

If you need further assistance with your individual circumstances please feel free contacting us anytime!

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